The energy industry’s measurement on Moody’s Investors Service liquidity stress index (LSI) has once again outdone itself. After hitting 5.8 percent in September, the highest level since October 2010, the LSI jumped to 6.1 percent in October, a figure not seen since March 2010.
The stress index has increased steadily – literally – with the stress that’s characterized the industry this year.
“The LSI has been trekking higher as the oil and LSI has jumped this year on the back of commodity-driven woes ripping through the energy sector,” Moody’s said in a Nov. 3 note to investors.
Take energy out of the equation, and the LSI is closer to 2.7 percent for October, just above the record low set in April 2013.
“There is definitely some upward pressure on the liquidity stress index, and it’s mostly confined to oil and gas,” John Puchalla, senior vice president at Moody’s, told Rigzone. “Our oil and team doesn’t think the sector is out of the woods yet. There are still some significant headwinds [facing the industry’s liquidity] … the borrowing base redetermination, rolling off hedges, and these are probably be going to put some pressure [on the sector] into 2016.”
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